Archive for the ‘Industry clusters’ Category

The 15th TCI annual global conference was held in the Basque Country from 16-19 October 2012. A highly successful event with 450 delegates representing 67 countries. (Unfortunately I was the only Australian this year). The conference theme was “Place based competitiveness in times of global change”, underlining the need to be focused and strategic in promoting the competitive advantages of regions and localities.

There IS something about Sas Sebastian! One of the many workshops was dedicated to understanding the bleak situation with the Spanish economy – however one would have thought Spain a much rosier place walking the streets of San Sebastian. The pounding of the Atlantic around the headland of the old town, the surf beaches and pintxos (Basque form of tapas) bars on every corner make for a wonderful setting. In fact San Sebastian was voted one of Europe’s top food and wine cities by Trip Advisor in 2012, boasting more Michelin star restaurants than any other European city.

The success of the Basque country in weathering the economic storms over Europe is palpable. Tours to various Basque clusters further highlighted this. Basque was one of the early adapters of a competitive cluster policy and their clusters are performing and centrepiece to the Basque economy.

Cluster policy pioneers such as Antonio Subira, Catalonia; Jon Azua, Basque Country; Ifor Ffowcs-Williams, NZ; Gerd Meier zu Kocke, Germany; Alonso Ramos Vaca, Mexico, discussed the past 15 years of TCI and cluster policy. The session facilitated by Christian Ketels, current TCI President, celebrated the vision and commitment of the Basque people to their policy of ‘clusterisation and strategic thinking’.

Michael Porter summed things up by saying we no longer need to understand the ‘why and what of cluster policy’, we just need to get better at doing the ‘how’. Michael Porter has recently developed a Microeconomics of Competitiveness (MOC) program as a platform that can be taught at universities around the world to improve understanding of competitiveness and clusters.

I presented the views of Australian women cluster managers in the “Gender and Diversity in Clusters” workshop with three other brave women from Denmark, Germany and Austria. The audience grew as we went along and by the end we felt we had hit on a topic that resonates. There seems to be a quiet swell of renewed interest in gender and diversity issues.

The issue, in Europe and elsewhere, is that plenty of women are in the top jobs, including managing clusters, but few are on Boards. Norway has just implemented a 40% compulsory inclusion of women on Boards policy apparently. Also an issue of representation of women in engineering and design sectors. They are at universities, but this is not translating to the industries. Great case study presented by Kersten Hindrum, an engineer from the Danish maritime sector, about a ‘women only’ designed pleasure craft which received rave reviews and media at this year’s Danish boat show. The point was that women use the indoors of the craft and therefore should design them!

Expect to see more on this subject at the TCI annual conference in Kolding, Denmark in September 2013.

The European Commission is much involved in urban and regional development thinking, and it has been promoting the Smart Specialisation concept. It basically involves EC regions specialising in activities that align with their competitive advantages. And the Commission offers financial inducements to this end.

Now the churlish might argue that this policy shift has come a bit late to help Greece, Spain and Portugal. But the truth is that ‘regions’ hold a lot of sway in Europe – they are a fundamental part of its social and industrial fabric.

What about north America, Asia, Australia and elsewhere?

Well they’ve just scraped the surface to date. Various federal and state governments have established loose policy frameworks for things ‘spatial’, and they provide a springboard for Smart Specialisation policies. Indeed, there are three reasons why a Smart Specialisation agenda would be timely.

First, Smart Specialisation themes will appeal to Treasury/Finance economists, and thereby help get support for better regional funding programs.

Secondly, smart specialisation concepts can provide a vehicle for federal/state departments dealing with regional development to swing other departments into collaborating on projects.

Thirdly, advancing a locality’s competitive advantage wins respect from cynical voters. Politicians are forever being accused of using regional grants to pork barrel – but by concentrating on specialised areas, the scope to politicise grant making is reduced.

Precincts – a vehicle for specialisation

Precincts and hubs are a means of capturing locational synergies and nurturing regional specialisation.

Alfred Marshall (Principles of Economics, 1890) was espousing this stuff more than a century ago. He talked about particular locations having types of specialisation. Indeed he anticipated later discussion of the role of place as a point of information exchanges, and of innovation developing through that “something in the air” that arises when people mingle and exchange ideas.

Marshall identified four particular features of precincts – knowledge spillovers as a result of informal networking; access to a common pool of factors of production such as labour or R&D facilities; specialisation of production within supply chains; and the facilitation of ‘comparison shopping’ for buyers.

Precincts are, by the way, virtually synonymous with clusters, and my colleagues and I are quick to highlight this to government officials who still think clusters are about picking winners and that companies are so ‘wired to competition’ that they cannot collaborate. Rubbish of course.

Five tips for facilitating specialisations and precincts

Anyway, getting back to the subject, it makes good sense for councils and regional champions to use local specialisation and precinct concepts in their lobbying efforts to federal and state agencies. Below are some suggested initiatives that could complement your lobbying effort.

1. Map your specialised assets and the linkages between them. This is a natural start point, and a great marketing tool. Examples – The Napa Valley (US) and Food Barossa (Australia) have done a good job of identifying and explaining its specialty food producers.

2. Get international agencies to study or talk about your area of specialisation. Depending on where you are, you might use the OECD, UN agencies or the World Bank to raise international awareness, and the agendas then filtered back to your state. We can connect you to these agencies.

3. Commission university research studies on national issues at your local level. These can be good copy for the daily newspapers, which in turn educate external audiences about your local specialisation.
4. Leverage your champions. Example – Americans are great at this. Now Wellington and NZ is on the global film and technology map thanks to Peter Jackson and his insistence on filming the Hobbit trilogy and Lord of the Rings. Prime Minister Keys supported him. And Hobart is more than Errol Flynn’s birthplace – it has reinvented itself thanks to the Museum of Old and New Art (MONA) created by eccentric gaming mogul David Walsh.
5. Do something bold and innovative. Towns, cities and suburbs often have specialisations, but they’re hidden to the outside world. A bold project can lift the specialisation profile.
The Cockatoo Network, based in Canberra, wants regions anywhere to share their ideas on Smart Specialisation. We are also linking clusters across international borders to facilitate trade and investment. Please contact us at apdcockatoo@iprimus.com.au or visit our blog at investmentinnovation.wordpress.

This year’s 15th TCI annual global conference was held in the Basque Country from 16-19 October.

It was a highly successful event with around 450 delegates representing 67 countries. (Unfortunately I was the only Australian this year). The theme of the conference was “Place based competitiveness in times of global change”, underlining the need to be focused and strategic in promoting the competitive advantages of regions and localities.

There’s something about Sans Sebastian! One of the many workshops was dedicated to understanding the bleak situation with the Spanish economy – however one would have thought Spain a much rosier place walking the streets of Sans Sebastian. The pounding of the Atlantic around the headland of the old town, the surf beaches and pintxos (Basque form of tapas) bars on every corner make for a wonderful setting. In fact San Sebastian was voted one of Europe’s top food and wine cities by Trip Advisor in 2012, boasting more Michelin star restaurants than any other European city.

The success of the Basque country in weathering the economic storms over Europe was palpable. Tours to various Basque clusters further highlighted the fact. Basque was one of the early adapters of a competitive cluster policy and their clusters are performing and centrepiece to the Basque economy.

Cluster policy pioneers such as Antonio Subira, Catalonia; Jon Azua, Basque Country; Ifor Ffowcs-Williams, NZ; Gerd Meier zu Kocke, Germany; Alonso Ramos Vaca, Mexico, took to the floor to discuss the past 15 years of TCI and cluster policy. The session, facilitated by Christian Ketels, current TCI President, resulted in a celebration of the vision and commitment of the Basque people to their economic development policy of ‘clusterisation and strategic thinking’.

Michael Porter summed things up – by a video-conference – saying we no longer need to understand the ‘why and what of cluster policy’, we just need to get better at doing the ‘how’. Michael Porter has recently developed a Microeconomics of Competitiveness (MOC) program as a platform that can be taught at universities around the world to improve understanding of competitiveness and clusters.

I presented the views of Australian women cluster Managers in the “Gender and Diversity in Clusters” workshop with three other brave women from Denmark, Germany and Austria. The audience grew as we went along and by the end we felt we had hit on a topic that resonates. There seems to be a quiet swell of renewed interest in gender and diversity issues.

The issue, in Europe and elsewhere, is that plenty of women are in the top jobs, including managing clusters, but few are on Boards. Norway has just implemented a 40% compulsory inclusion of women on Boards policy apparently.

Also an issue of representation of women in engineering and design sectors. They are at universities, but this is not translating to the industries. Great case study presented by Kersten Hindrum, an engineer from the Danish maritime sector, about a ‘women only’ designed pleasure craft which received rave reviews and media at this year’s Danish boat show. The point was that women use the indoors of the craft and therefore should design them!

Expect to see more on this subject at the TCI annual conference in Kolding, Denmark in September 2013.

The PM’s Manufacturing Taskforce tabled its ‘Smarter Manufacturing’ report in August 2012, and the Government will reply in an Industry & Innovation Statement around November.

The Taskforce report is an excellent document in that it walks the reader through the realities of a high dollar, high cost economy. It provides some good pointers for other ‘resource boom’ economies such as Canada/

The report includes some intriguing overseas examples such as the UK’s Catapult Centres and Singapore’s Biopolis and Fusionopolis. One can see the deft hand of Professor Roy Green (University Technology Sydney) in the report’s thinking.

The recommendations include a call for a more effective Enterprise Connect program, and increased investment in transport infrastructure, skills, smarter workplaces etc. Nothing revolutionary there

BUT there is new-age thinking as follows:

“As part of a broader overhaul, the non-government members of the Taskforce propose the development of globally-oriented innovation precincts that build critical mass around our comparative advantages and opportunities. And a new Smarter Australia Network linking businesses, research organisations and others is proposed to address systemic barriers to more widespread collaboration.

Recommendation 21:

The non-government members of the Taskforce recommend the establishment of a limited number of Smarter Australia Precincts. These would involve large-scale facilities that bring together a critical mass of capabilities and industries – across businesses, researchers, end users, students and government – to share resources, support knowledge spillovers and diffusion, and strengthen networks.

Recommendation 22:

That smaller scale innovation hubs, based on niche specialisations, could be based in major regional centres, and based on existing strengths of these regional centres.”

Comment

We expect that the Australian Government will endorse these recommendations and that they will be the centrepiece of the PM’s statement.

The significance of the proposed ‘precincts-hubs’ approach in three-fold

– this is the first time that a nation-wide network of precincts and hubs has been considered i.e. centres of excellence have been commonplace, but nothing on a strategic, all-encompassing scale.

– it brings a positive and regional perspective to industry policy i.e. regional efforts to date have been rescue packages for Wollongong, Adelaide, northern Tasmania etc.

– there is scope is to connect up not just manufacturing players, but others along the supply chain i.e. services, mining, government. This is NOT just about manufacturing.

Bottom Line

Local councils, RDA Committees, analysts and universities (both city and rural) should read the report ASAP – just google it. And overseas players might note this trend, because these precincts and hubs provide a great vehicle for international engagement.

PS – the report’s recommendations by non-government members is rather quaint. It seems to be an attempt by the Industry Department to be arms length from the business leaders and academics on the Task Force. The ‘government’ members made no recommendations!

We’ve been doing some research on governance structures operating around the world, looking for ways of addressing the slow progress of marine disaster relief and maritime safety in the Pacific and Africa regions.

And we stumbled across this European Network, whose aim is to promote and reinforce the various Maritime Clusters and players therein. They set up a network, rather informal at the beginning, to create a link, to be reinforced year after year, between national cluster organisations.

As its website (www.european-network-of-maritime-clusters.eu) explains, ‘the purpose is to put the entirety of the European maritime cluster on the map…the Network provides a platform from which joint activities can be developed.’

The organizers emphasise that the Network is not to replace the maritime branch organisations which have existing representation and lobbying structures in place. Membership means that it is easier for the organizations to attract EU authorities’ attention.

Similarly the Network can assist the European Commission and others in pursuing integrated development approaches by:
A. pushing the national clusters to organise the various maritime players within their boundaries.
B. bringing the national clusters together to drive stronger collaborative outcomes.

The EC has a lot to offer in terms of maritime technology and this Network concept is worthy of close attention in other sectors as a mechanism for addressing coordination failure.

Professor Mike Enright (Hong Kong University) was in Canberra recently on business, and the Cockatoo Network convened a dinner to get an update on competitiveness, clusters, China etc. etc. And it was a stimulating session.

Mike was a key researcher on Porter’s ‘Competitiveness of Nations’ project and has since notched up 16 years in Hong Kong, where he provides a valuable East-West bridge for not only his students but the corporate world via his consultancy business.

Points of particular interest:

1. Apart from resources and agriculture, Australia lacks the scale to be competitive on the world stage. However it does have sufficient complexity of systems and arrangements to have projects with sufficient scope to be of world interest. The capacity of Australian managers to be engaged across the full scope of their business in Australia is a factor in their international success.

2. In a similar vein, Mike said that one advantage Australia might have in the region was our ability to generate ideas, solve problems etc. This was possibly linked with Australia’s relatively well educated workforce and inclusive/sharing social norms and work practices.

3. Mike suggested Australia’s competitive advantage in Asia is indeed the ability of our senior managers (who are there in big numbers) to act as ‘integrators’ i.e. to manage the integration of people and resources from across different nations and cultures. Managing a value chain! We agreed that since Australia is losing its presence in manufacturing, it makes sense to build a name in such a field. For example, Americans are known for their marketing flair, the Nordics for design skills, the Germans for engineering excellence, the Latins for food and flair. The unanswered question is what policy levers might be pulled to consolidate Australia’s skills in this field.

4. However Mike noted that the integrator function goes unobserved. The discussion turned to the possibility of Lighthouse Projects that could highlight international alliances and Australia’s role as an integrator. Mekong River Bridge is now a 20 year old example.

5. The upcoming Manufacturing Statement was discussed, and the possibility of it featuring clusters. Mike correctly feels that Treasury thinking holds sway in public policy in Australia, and recommends that the best way to sell clusters to Treasury types is to explain their role in addressing market failures e.g. managerial myopia, under-provision of public goods, coordination failure.

We have been approached by Jagat Shah, CEO of Cluster Pulse in Gujarat, one of the most prosperous state of India, concerning the possibility of linking up with Indian companies involved in their clusters.

Cluster Pulse is well-known in international economic development circles. It says that the region is the largest and fastest growing in India, and is keen to develop trading relationships with overseas firms using clusters as the vehicles for such interaction.

We really welcome his approach and his enthusiasm – their website http://www.clusterpulse.org has a good deal of relevant material. We are currently following up to determine how best to realise improved trade and investment outcomes via Cluster Pulse and similar facilities in other countries.

SA once ran Australia’s best cluster program. The main architects were Mick O’Neill (now an executive with Adelaide City Council) and ex-Irishman Hugh Forde. This is the last article in the series by Mick – previous clusters featured were water, defence, spatial information and multimedia – refer our blog.

Arts, Tourism and Sports all had a government department that initiated/sponsored the respective cluster initiatives, albeit engaging industry leaders to drive the project. The process again focused on strategic initiatives, engaging local industry and building collaboration. The department took up the role of supporting the initiatives and the cluster, so again it was inappropriate to establish a new entity. Projects had a life and the degree to which they contributed in the long term was debatable.

But one anecdote is telling. Prior to the tourism cluster initiative the state and federal bodies were at loggerheads. The engagement of the federal body in the state process led to SA being more explicitly recognised in national promotion campaigns and it enhanced ongoing collaboration.

How do you put a value on something like this? Similarly, while it may seem amazing, both Arts and Tourism sectors acknowledged that there had been only limited cooperation between the sectors. Explicit initiatives were thus developed to address this. While not all as tangible, there were numerous examples of benefits that emerged from the respective processes. While there is no evidence of the ‘cluster’ today, the Arts and Tourism sectors definitely exist and many would say the cluster initiatives were valuable.

Healthy Ageing and Environmental Industries are interesting. They were both ten years ahead of their time (another lesson) and received limited government support although participants were tremendously enthusiastic. Again a variety of strategic projects were established and in each case an entity was established on a shoestring budget. Inevitably the burnout law applied.

The Environmental Industries initiative was funded by the Federal government under an emerging industries program. Ironically both sectors are flavour of the month today – with environmental industries now largely rebadged as Cleantech, while healthy ageing is a massive budget issue and substantial market opportunity.

It’s probably OK to talk about failed clusters here too, although I am currently working with a network that emerged from the environmental industries process and has survived for the past 10 years. It’s in the energy efficiency/smart grid space – an area whose time has definitely come.

In summary – adequate funding, usually state government, is critical as is the rationale and process involved in selecting the clusters (responding to government agendas is fraught). Nevertheless we need to be careful about using the term failed clusters. We need to distinguish the clusters as they exist in the real world from the groups that we’ve facilitated as well as the entities that have emerged out of these facilitated interventions. The fact that an entity might not survive or the groups no longer meet does not mean that the sector/cluster is not healthy or growing or that the initiative ‘failed’. Any number of cluster activities may have contributed to the growth of the cluster but have their own finite life for various reasons.

SA once ran Australia’s best cluster program. The main architects were Mick O’Neill (until recently Deputy CEO, SA Dept. of Trade & Economic Development) and ex-Irishman Hugh Forde. In this exclusive series, Mick provides Cockatoo readers with the lowdown on the origins and performance of another cluster. In recent editions we have featured water, defence, spatial information – refer our blog.

Multimedia was one of the two original pilots, selected largely due to the interest from both state and federal governments at the time. In particular there was a federal program to establish a Cooperative Multimedia Centre in most capital cities.

The cluster project was designed to complement the establishment of the CMC, engaging the industry and developing strategic projects (skills, awareness, research, networking etc.). The CMC subsequently provided a home for the initiatives so in this case there was no need or logic to establish a new entity.

The cluster projects had a finite life and the CMC continued much longer albeit also closing down some years later. Arguably the initiatives contributed to the growth of the sector in their own right but there is no sense of a multimedia sector/cluster today although there is a proliferation of web developers and a digital content ‘sector’ providing animation and post-production to the international film industry, game development, Iphone and Ipad apps, industrial simulation etc. Many of these activities can be traced back to the multimedia initiatives and some of today’s success stories were involved and will say the cluster activities contributed along the way – if only to enable networking, generate confidence, validation etc.

Once again we need to be careful about using the term failed cluster but there is undoubtedly a lesson about responding to government priorities rather than looking at the economic fundamentals of the sector.

SA once ran Australia’s best cluster program. The main architects were Mick O’Neill (until recently Deputy CEO, SA Dept. of Trade & Economic Development) and ex-Irishman Hugh Forde. In this exclusive series, Mick provides Cockatoo readers with the lowdown on the origins and performance of two more clusters.

Water

This is similar success story to that of defence, where state government funding and alignment with policy were also critical. The sector/cluster was chosen in conjunction with a state government project to outsource management of the water assets in Adelaide(state capital) with commitments/obligations for industry development. Cluster development had been proposed by the successful bidder (United Water) during the bid process (based on advice from consultants from Stanford Research Institute). Hence United Water readily embraced the MFP/Business Vision 2010 process. A new entity was established (Water Industry Alliance), state government provided substantial funding, United Water provided significant leadership, in-kind resources and international linkages and the entity is still operating successfully. Exports from the industry have grown from A$40m to A$400m over the past 10 years and the industry has grown accordingly. (http://www.waterindustry.com.au)

Devils advocates will say that the industry growth would have happened anyway. But United Water, theAllianceand many of its participants will say that, notwithstanding contractual obligations, the cluster model provided an effective process, a focus, an industry identity which did not previously exist, an ongoing mechanism for engaging with the existing and emerging local industry, and ongoing facilitation to make it all happen. TheAlliancestill actively uses the word “cluster” in referring to its operations and its stakeholders.

The industry now has momentum and critical mass, despite the outsourcing contract has finished. TheAllianceis currently facing significant funding issues with a substantial reduction in government funding. Once again the ongoing sustainability of the entity is not synonymous with the health of the cluster, although many of us would argue that it will continue to add value to the growth of the sector as long as it exists.

Spatial Information

A similar initiative to water – off the back of a government outsourcing initiative, with industry development objectives. There was significant industry engagement and activity addressing strategic issues. An entity was formed and continued for some years, supported by Fujitsu as the lead outsourcing contractor. The anticipated level of government business was not forthcoming and Fujitsu eventually withdrew its support.

Today there is little evidence of a spatial information sector/cluster, although there is much spatial information activity undertaken by ICT companies, engineering services companions and government departments. Effectively Spatial Information (like multimedia and desk-top publishing before it) has proven to be a technology and a process as opposed to an industry. Here we can thus talk about a failed cluster. Arguably it was selected for the wrong reasons and technology and the market evolved to overtake it.